Tuesday, January 11, 2011

Federal Reserve's Yellen: QE1+2 to Create 3 Million Jobs

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The arrogance of these people... or at least their models.  I'd have to search through my records but didn't I hear our economic leaders in the administration tell us if only we pass this $800B stimulus in early 2009 we'd keep unemployment below 8%?  Or indeed Ben Bernanke saying QE1 would create some millions of jobs (I can't recall the amount - one man can only keep track of so many empty promises).  Now the new VP of the Fed, Janet Yellen promises us QE2 will create 1.2M jobs by 2012.... on top of the 1.8M the Fed has already created.  Since no one can ever disprove her, I guess it's fine and dandy to say whatever you wish.  Considering a lackluster 200K jobs a month (we need 125K+ simply to keep up with population growth) will create 2.4M jobs "by 2012" this is not saying much but hey it's only $2.3 Trillion.  And what's a few trillion amongst friends?

As I said during every other promise of

XYZ monies = ABC more jobs

why not just pro rate it and get us back to full employment.  So if Janet says $2.3T creates 3M jobs why not get us back to full employment with say $8T quantitative easing?  Bigger question is - who knew just doing QE was all it took to create jobs!  Why bother with K-12 and university education - our central planners at the Fed can create all the jobs they want with a press of a button. 

Who are we to doubt anything coming out of the Fed...





Another interesting comment - the Fed will be back to a "possible" normal balance sheet in 2059 2018.  She thinks.  Maybe.  But there will be no pinkie swearing.  Of course this assumes no recessions in the next decade (drink Kool Aid here).  Or a huge mop up job the Fed is going to have to do again when the bubbles they are creating today, cause global dislocations in the future. (insert leaping unicorns here)  Leading us to QE6, QE7, and QE8.


Via Bloomberg:
  • Federal Reserve Vice Chairman Janet Yellen presented a possible timeline of about seven years before the Fed’s balance sheet is restored to normal levels, while saying the central bank’s asset purchases will end up creating 3 million jobs by 2012
  • The researchers conclude that private employment is currently 1.8 million higher than it would have been without the policy and will get an added boost of 1.2 million by 2012.  (I believe this is called the "finger in air" model
  • Yellen referred to a model created by Fed economists that assumes the central bank will complete its second round of large-scale Treasuries purchases within a year. The Fed’s balance sheet would stay “elevated” for two years before returning to a normal size over five years, she said, alluding to the economists’ research. 
  • The Fed’s moves won’t hinder growth overseas, are having “only moderate effects on the foreign exchange value of the dollar,” and do not appear to be triggering “significant excesses or imbalances in the United States,she said. 
I believe that is identical to what Alan said in 2004.  Give it time Janet and let's check back with each other down the road. 

[Mar 12, 2010: US Dollar Takes a Hit as Janet Yellen Leaked to be Nominee to Replace Donald Kohn as Fed VP]

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